Swiss ups black money vigil as India threatens criminal action

With India and some other nations threatening criminal proceedings over suspected black money in Swiss banks, the European nation has stepped up its supervisory and enforcement efforts to keep away the illicit funds from its banking system.

This comes at a time when a number of Swiss institutions have seen “asset outflows” and the tax status of many of their clients have been found to be “inappropriate”, as per the Swiss Financial Market Supervisory Authority (FINMA), which also has the mandate to combat money laundering activities.

Switzerland has been making efforts to strengthen its bilateral cooperation with India and some other countries on tax matters, as many Swiss banks are finding themselves in regulatory crosshairs in multiple jurisdictions.

Acknowledging that international pressure on cross-border wealth management remained high in 2014, FINMA said in its latest annual report that the same would continue to preoccupy the country’s financial sector in the years to come.

“Germany, France, Belgium and Argentina have followed the US in launching high-profile criminal investigations, while Israel and India are threatening to do so,” the supervisory authority said, while adding that it is keeping a close watch on such proceedings.

FINMA’s observation comes at a time when Indian authorities are making efforts to trace black money allegedly stashed by its citizens in Swiss banks. Recently, there was also an international uproar over reports suggesting that many entities parked their illicit assets at HSBC bank in Geneva.

Elaborating on cross-border taxation issues, FINMA said it is deploying both supervision and, where necessary, “enforcement to ensure that banks adequately assess, manage and limit their legal and reputational risks in this area”.

The regulator said that a number of institutions recorded asset outflows as they parted with clients whose tax status was inappropriate or who had filed voluntary declarations in their countries of origin.

“This trend will intensify in the run-up to the planned automatic exchange of information scheduled to begin in 2017/2018,” it noted.

Sources recently said that Swiss banks are asking their Indian clients to provide fresh undertakings to ensure that untaxed money is not stashed in their accounts.

Besides, they have also sought auditor certificates from high net worth individuals and corporate clients to vouch for the “clean status” of their money.

Last month, a Swiss Finance Ministry spokesperson had said that talks with India on automatic exchange of tax information would begin at the “earliest” once the domestic procedures are in place.

According to FINMA, one of its major concerns is the declining trust in the finance industry.

“This trust is the key to financial stability and therefore to a flourishing economy. Misconduct at many banks around the globe has eroded that trust.

“We have seen many examples of unacceptable business conduct: manipulation of stock prices and foreign exchange markets, and aggressive conduct in cross-border wealth management, all of which absorbed much of our time in 2014,” the report said.